18 August 2005

Economics & Prosperity III

The Jenius is more Randian Objectivist than a Libertarian when it comes to the role of government. (No, there are no other options.) Part III of the ongoing presentation of What Everyone Should Know About Economics and Prosperity, by The Fraser Institute, continues with the role government plays in aiding or barring economic progress.

The wealth and sheer abundance of practical information in this section forces Me to simply list the 10 major points and provide brief commentary. The Jenius urges you to also read the piece, here.

1. When Government Protects the Rights of Individuals and Supplies Goods that Cannot Be Provided Through Markets, It Helps Promote Economic Progress
The Fraser Institute calls the two governmental functions protective and productive. Using that simple scorecard, ask yourself if Our government protects us (with respect, not by treading on Our rights like bootjacked Huns) and if Our government is productive and promotes productivity.

2. Government is Not a Corrective Device
Quoting further: "PEOPLE OFTEN HAVE A TENDENCY TO THINK of government, particularly a democratically elected government, as a corrective device. They act as if government intervention will solve all types of problems (for example, poverty, inadequate health care, poor education, or the high cost of housing). This view is false. Government is not an entity that will always make decisions in the "public interest," however that nebulous term might be defined. Neither is it a corrective device available for use when market organization fails to achieve a desired outcome."

3. The Cost of Government is: (a) the Decline in Private Sector Output as the Result of Government's Use of Resources, (b) the Cost of Tax Compliance, and (c) the Unrealized Gains from Exchanges Squeezed Out by Government
Again, quoting further: "There are three types of costs incurred when governments provide goods and services. First, there is the loss of private sector output that could have been produced with the resources that are now employed producing the goods supplied by the government. The resources that go into police protection, highways, missiles, education, health care, or any other government "product" have alternative uses. If they were not tied up producing goods supplied through the public sector, they would be available to the private sector." This is EXACTLY why We should be ashamed and infuriated at the grotesquely swollen size of Our government.

4. Unless Restrained by Constitutional Rules, Special Interest Groups Will Use the Democratic Political Process to Fleece Taxpayers and Consumers
The Jenius struggles to avoid sarcasm... The solutions here are to either develop alternatives to government "largesse" (essentially, to act like an adult and not a whiny child) or form/join a special interest group and add your whiny voice to the din.

5. Unless Restrained by Constitutional Rules, Legislators Will Run Budget Deficits that are Often Harmful to the Economy
Legislators spend Our money to cater to Our votes. Think about that. Hard. Why should We put up with reckless splurging and theft of Our income while tolerating the Fools' uncontrolled piggish pandering, prancing and prating?

6. When Government Becomes Heavily Involved Attempting to Help Some People at the Expense of Others, Resources Will Move Away from Production and Toward Plunder. Economic Progress Will Be Retarded
Example: Our government.

7. The Cost of Government Income Transfers Will Be Far Greater Than the Net Gain to the Intended Beneficiaries
Two more quotes: "Income is not like "manna from heaven"...On the contrary, income is something that people produce and earn. It is earned by individuals who provide others with goods and services for which they are willing to pay." Moral: Stop paying people for doing nothing. Corollary: Reduce bloated government payrolls.

"If you subsidize something, you will get more of it. Anti-poverty transfers are no exception to this general rule. Transfers directed toward the poor encourage high-risk lifestyles (for example, the use of drugs, dropping out of school or the workforce, births by single mothers, marital dissolution, and abandonment of children by fathers). All of these choices tend to increase the number of people who are poor." Moral: Stop paying people to do nothing of value. Corollary: Teach what to do.

8. Government Central Planning of an Economy Merely Substitutes Politics for Markets; Such an Effort Will Waste Resources and Retard Economic Progress
Usually associated with communist regimes, "central planning" can emerge when (a) elected officials act without regard to constituencies, thus (b) catering to pressure groups and special interests creating (c) a parasitic body that grows to feed itself with greater abandon. The playing card of this gambit is the "Public Project"; amuse or enrage yourself counting how many times it's played.

9. Competition is Just as Important in Government as in Markets. Competition Among Government Units and Between Government Enterprises and Private Organizations Will Help Assure that Government is a Servant of the People
"Given the incentive structure within the public sector, it is vitally important that government enterprises face competitors. Prosperity will be enhanced if private firms are permitted to compete on a level playing field with government agencies and enterprises. For example, if governments operate vehicle maintenance departments, printing shops, food services, garbage collection services, street maintenance departments, schools, and similar agencies, private firms could be given an equal opportunity to compete with public enterprises. The competition would improve performance, reduce costs, and stimulate innovative behaviour in both sectors. As a result, consumers/taxpayers would get more for their money." Like my friend Roberto says: It's good business to replace the government. The Jenius adds: How can you lose against a one-digit IQ opponent? What are We waiting for?

10. Constitutional Rules that Bring the Political Process and Sound Economics into Harmony Will Promote Economic Progress
"THE INTELLECTUAL FOLLY OF OUR AGE is the view that democratic elections alone will establish an environment conducive to economic progress. Both history and political theory indicate that this view is false. If government is going to be a positive force for economic prosperity, the rules of the political game must be designed to bring the self-interest of voters, politicians, and bureaucrats into harmony with economic progress. This will require that the scope of government be limited and that government remain neutral among the various sub-groups of citizens.

When government is unconstrained - when everything is up for grabs within the political process - divisive and predatory activities will abound. Individuals will spend more time organizing and fighting over slices of the economic pie and less time producing "pie." As a result, output will be smaller than would otherwise be the case. Animosity, distrust, and even hatred among factions will grow, while production stagnates. Life in a highly politicized economy is not very pleasant."

And to punctuate: "While government plays an important role in maintaining the law and order that are essential to voluntary economic activities, it is limited government, not majority rule, that is the key to economic progress. The sooner we learn this important point, the more prosperous we will be."

The Jenius Has Quoted

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